How Hedge Funds Turned Trump's Tariff Chaos Into Gold

What if $925,000 could become $7.4 million?

When the Supreme Court struck down Trump's sweeping tariff policy on Friday, a select group of Wall Street firms quietly celebrated. These investment companies had been betting against Trump's tariffs since April 2024, purchasing the rights to theoretical refunds at pennies on the dollar.

Thomas Braziel, founder of 117 Partners, invested $925,000 of his own money in tariff refund claims. "We were like, [Trump] is capriciously applying the law," he explains. "That was the play."

Now, with the Supreme Court ruling that Trump violated the International Emergency Economic Powers Act (IEEPA), Braziel stands to make an eight-fold return.

The Distressed Importer Opportunity

The mechanics were straightforward but required deep pockets. Struggling importers, crushed by tariff payments, wanted to convert uncertain future refunds into immediate cash. Hedge funds swooped in, buying these claims for cents on the dollar through Wall Street brokerages.

"They didn't want to deal with anything small," says Neil Seiden, president at Asset Enhancement Solutions, one of the brokerages. The few hedge funds that participated typically bought tens of millions of dollars worth of claims.

The bet was simple: if courts eventually ruled the tariffs illegal, the government would have to refund the full amounts—delivering massive returns to the claim holders.

The Billion-Dollar Question Mark

But here's where it gets complicated. While SCOTUS ruled the IEEPA tariffs were illegal, it didn't explicitly require the government to issue refunds. "That's the billion-dollar question," says Seiden. "Everybody is in a state of flux."

The refund question now goes back to lower courts, where the Trump administration may challenge any ruling requiring government payouts. Lawrence Friedman, partner at Barnes Richardson law firm, notes: "The President does not like district courts making nationwide injunctions."

When asked about potential refunds Friday, Trump simply said, "I guess it has to get litigated."

The High-Stakes Dilemma

Investment firms holding refund claims now face a classic trader's dilemma: cash out some winnings by selling to another buyer, or wait out the legal uncertainty for potentially bigger gains?

"Trump is Trump is Trump, man," Braziel reflects. "I'm not sure if you want to be on the other side of him, no matter how good the legal arguments are."

Yet legal experts remain optimistic. "I think it's extremely unlikely that refunds won't get granted," says Friedman. For the hedge funds that made this contrarian bet, "it's a much better day than it was yesterday."